Umno’s media assets dilemma
Media Prima has started to divest assets while Utusan is in dire need of funds to stay afloat
TO say that things have changed for some Malaysian businesses since the general election four months ago are an understatement.
The country was thrust into a completely new political landscape after the party that ruled the country for 61 years was ousted.
Inevitably, among the casualties of the change in the government are businesses owned by the defeated party - in this case – the two media companies owned by Umno.
The possibility of an abrupt end to a steady stream of government contracts, coupled with the perception that the companies will struggle to compete on a new level playing field, sent the stocks of Utusan Melayu (Malaysia) Bhd and Media Prima Bhd tumbling almost immediately after the elections.
Fast forward to four months later, Utusan Melayu, which publishes the Utusan Malaysia newspaper, is facing the possibility of being de-listed, while Media Prima has begun selling its prized assets.
The question is, what is the future of these Umno-owned companies under the new administration?
It also raises the issue of whether Umno will be able to hold on to its ownership of these companies, or decide to relinquish their hold.
If the party does decide to sell its stakes in Media Prima and Utusan Melayu, it remains to be seen if there prospective buyers would pay the price expected considering that the financial situation is dire, especially for the latter.
According to a person familiar with the industry, both Media Prima and Utusan Melayu are attractive to investors, mostly due to its assets and properties -- not for their core business.
“If the companies have begun divesting assets, they may no longer be as attractive to investors.
“Even if Umno looks to sell off its stakes, the question is whether there will be takers,” he says.
So far at least two tycoons, who are already in the media business are looking at the media assets, especially Media Prima.
The source adds that one of them approached investment bankers to look at proposals to acquire Media Prima.
However, after Media Prima’s recent sale of two of its prime assets, it is not known if he is still considering to acquire the company.
Last week Media Prima sold parcels of land in in Bangsar and Shah Alam to PNB Development Sdn Bhd for RM280mil.
The Bangsar land is where the news operations of The New Straits Times is located while the property in Shah Alam houses the printing plant.
Both of these assets were valued at RM47.93mil and RM93.97mil, respectively, as of December 31, 2017.
Moreover, Umno does not really control Media Prima because funds and the Employees Provident Fund (EPF) hold more shares than the political party.
A nominee company has been actively buying blocks of shares in Media Prima.
The group’s recent filings to the stock exchange shows Morgan Stanley & Co LLC began its active buying streak on April 4, 2017, and now has a 12.72% stake in the company with 141.07 million shares.
It is not known who are the parties behind behind the nominee company.
Speculation is rife that the owner of another prominent media company could be the buyer of these shares.
“The owner has been told to look into Media Prima,” said a source.
Among the top five shareholders of Media Prima, two of them are investment funds aside from Morgan Stanley & Co.
The other four are Employees Provident Fund Board, Gabungan Kesturi Sdn Bhd, Altima Inc and Amanah Saham Bumiputera. Based on its recent annual report, the group is now left RM73.81mil worth of assets, following the recent sale of two major assets.
Earlier on May 2, it also disposed of its 21.36% interest in Malaysian Newsprint Industries Sdn Bhd (MNI) for RM45.4mil.
In terms of financial performance, for the second quarter ended June 2018, the group recorded a profit of RM32mil on the back of a revenue of RM342.4mil, compared to a loss of RM132.9mil during the same period last year.
Analyst said that the sale of assets helped the performance in the second quarter and not the operations.
Its mainstay free-to-air television revenue declined by 6% in the first six months of this year, while NSTP’s topline was also lower by 13% due to lower advertising and newspaper sales of 15% and 30%, respectively.
Another interesting development to note is the departure of former Employees Provident Fund’s (EPF) boss Datuk Shahril Ridza Ridzuan from the board of Media Prima, following his appointment as managing director of Khazanah Nasional Bhd.
Media Prima Bhd, in its filing with Bursa Malaysia, said the resignation was due to the fact that he was no longer a nominee of the EPF.
Interestingly, Shahril is also a director in Gabungan Kesturi Sdn Bhd - a company owned by Amanah Raya Bhd - through which Umno holds 11.1% of its 19.06% in Media Prima.
As for Utusan Melayu, the company was classified at a Practice Note 17 (PN17) company late last month.
The group defaulted on loans from Bank Mualamat Malaysia Bhd and Maybank Islamic Bhd and has been also been taken to court by two other companies over its failure to refund deposits.
Clearly, things do not look good for Utusan Melayu at the moment.
In terms of assets, the company has RM258.39mil worth of land and properties as of end-2017.
Utusan Melayu registered a loss of RM8.5mil for the first half ended June 30, 2018.
Its full financial year ended December 31, 2017, saw a loss of RM7.28mil, albeit narrowed from the previous financial year’s loss of RM68.47mil.
Umno, via RHB Nominees (Tempatan) Sdn Bhd, currently holds a 49.77% stake in the company.
The second largest shareholder in Utusan Melayu is Nilam Setar (M) Sdn Bhd with 14.76% equity.
Nilam Setar is owned by Datuk Seri Ismail Yusof, who is the executive vice chairman and a trustee of Albukhary Foundation.
Utusan Melayu, with all the challenges it currently faces, needs cash, which Umno may not be able to provide.
In the past, Utusan was a benefiaciary of various forms of government spending in the communications industry. But now, it is no longer the case.
Hence, it would make sense for Umno to exit or reduce its stake and allow a new substantial shareholder to come in and revive the struggling media company.
The reality of losing government contracts and having to compete on a level playing field has hit these companies hard. Adding to the presssure is the change in government has lifted the restricions to start a newspaper in the country.
Umno’s hold on Media Prima and Utusan Melayu is slowly loosening and the continued slide in business is not helping matters. Moving forward, Umno will have to decide what do with the media companies – whether to hold on to them for political purposes or dispose them and allow new shareholders to takeover and stay relevant in the competitive industry.